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Good Times for Airport Operator Fraport

With record profits and a growing international profile, airport operator Fraport is a bright spot on Germany's bleak business landscape.

In Germany, the mammoth A380 will be at home in Frankfurt

In recent years, airport operator Fraport -- which runs the massive Frankfurt International Airport in Frankfurt am Main -- has managed to avoid the economic dire straits plaguing most large, listed German firms. It recorded a highest ever €150 million ($200 million) net profit in 2004.

The company also saw record traffic, with 51 million passengers going through its terminal -- the first time the 50 million mark has been surpassed. Fraport also had its best-ever shipping results that year, moving 1.75 million tons of freight, up 13 percent from 2003.

Terminal 1 in Frankfurt Airport, February. Passenger numbers are up.

Fraport, which also runs the Frankfurt Hahn airport in the Hunsrück region, went public in 2001. Since then it has been increasingly active internationally.

There is no question that huge new Airbus 380 super jumbo jet, which can seat up to 880 passengers, will take off and land at the airport in Frankfurt am Main. But in order for this to happen, the plane needs an expanded landing strip, a new terminal, and a hangar for the "giant of the air."

All in a day's work

To achieve all this, Fraport -- Europe's second-largest airport operator after the British Airport Authority in London -- will have to jump a few hurdles.

For example, they will need to overcome the opposition of environmentalists in order to cut down forests. In the end, several hundred thousand people in the Rhine-Main are likely to try and stop Fraport from building the larger landing strip.

But that's all in a day's work for a company that runs an airport the size of a city and that employs some 13,000 of Frankfurt's 65,000 workers overall.

The company was created in 1924 to manage the airport in Frankfurt. Today, the multifaceted organization operates flights and traffic and manages real estate and rental property, among other things. In the past few years, it has been increasingly testing the waters of consulting and marketing, and has pursued an aggressive expansion strategy.

Security at Frankfurt International Airport

The firm is active in airports in Lima, Peru, and Antalya, Turkey, said Fraport executive Andrea Pal. For the past eight years, Fraport has managed the Cairo airport, and now it is mentoring the Egyptian locals.

"In the training program, groups of Egyptian managers will come to Frankfurt. They will learn about strategic topics, about business development, about where you need to be active to develop the business," Pal said.

Fraport is also bidding for segments of foreign markets, for example seeking partial stakes in airports in Delhi and Budapest, Pal said. And the company has been working closely with the Tokyo airport.

"We have a cooperation (in Tokyo)," said Pal. "The people in Narita want to become listed, and they want to know how we managed in 2001. ... And we have to get them to answer specific questions about how they will solve operational problems in their airports."

No thrilla in Manilla

But business hasn't always been perfect at Fraport. The biggest flop so far was the company's involvement in Manila, which led to a Fraport write-off of nearly €300 million in 2003. The airport terminal building in the Philippine capital was supposed to be a calling card for Fraport's international activities. But the megaproject was stopped shortly before its opening, when a new government in Manila failed to recognize the contracts Fraport had signed with the building and operation consortium.

It was a loss for Fraport, but also a lesson. "You can never be sure other parities on such a project will stick to the rules. In new agreements, we choose our partners carefully, and take care with how we formulate our contracts," Pal said.

A future in shipping

One other difficulty is a hoped-for management takeover at the Sheremetyevo International Airport in Moscow. For years, there have been talks, contacts -- and Fraport is getting anxious.

"We have been trying for years to get that business going. The (bad) condition of that airport is known worldwide. For us it is clear what needs to be done. ... Only, in Russia, management is constantly being replaced, having to do with political interests, friendships. So I don't know if we can really get a foot in the door there," said Pal.

Fraport sees shipping as its next big area. Its subsidiary firm ICTS wants to provide security for cruise ships, Pal explained. It has already begun doing security checks at a cruise ship terminal in Bremerhaven.

If all goes well, it will be another growth market for Fraport, since the future in that sector looks bright indeed.